Agenda item

Report of Deputy Chief Executive.

Cabinet lead member: Councillor Gill Mattock.

(1) Updated MTFS and associated plan 2017-21 (appendix 2 of report) approved.

(2) Balance of assumptions made in strategy agreed.

(3) Emerging budget proposals for  2018/19 to be brought to cabinet in December prior to detailed consultation and that MTFS be re-presented if material changes arise in interim.

(4) Principal risks of strategy (appendix1 of report) agreed.

16.1 Cabinet considered the report of the deputy chief executive setting out an overarching financial strategy to support the council’s strategic priorities and plans over a four year period.  The medium term financial strategy (MTFS) was a rolling 4 year strategy that took into account:

• The external financial environment.
• The overall financial demands of services.
• The council’s existing and projected financial resources.
• The council’s political priorities and stated aims.
• The joint transformation programme with Lewes District Council.
• The council’s corporate plan.
• The major service strategies and plans.

The MTFS had last been approved in July 2016 and set the backdrop for the 2016/17 budget setting process as well as a informing a 3-year rolling service and financial planning cycle.

16.2 In common with most authorities the medium term outlook for the council was extremely challenging and in order to protect and improve services an ambitious ongoing programme of savings was key to success.  With more radical measures required, it was essential that the council took a longer term approach to savings as more radical savings initiatives would inevitably take longer to plan and deliver.

16.3 Over the life of the last two parliaments the government effectively reduced the general support to the council by some 60% in cash terms which equated to over 70% in real terms.  Government funding was expected to fall a further 20% over the next parliamentary cycle to 2022/23. 

16.4 To protect front line services the council had put in place a priority based budget system that had kept pace with the scale of cuts to funding and made provision for reinvestment in services.  The council’s joint transformation programme (JTP) provided the methodology to deliver efficiencies and support the councils corporate plans.  The MTFS and capital strategy identify and direct resources at a strategic level, which were then detailed via the service and financial planning and budget setting process.

16.5 In setting recent annual budgets the council had achieved its “golden rule” of meeting its ongoing budget requirement from ongoing resources in each year.  Technically, the rule applied to the cycle of the MTFS, and it was reasonable to use reserves to smooth out the budget as savings accrued over the cycle.  By not using reserves in this manner it had meant that reserves over the minimum level were available for one off investments in services decided via the service and financial planning process.

16.6 The council, as a registered social landlord, was obliged to run a housing revenue account (HRA) that was statutorily ring-fenced from its general fund.  A 30-year rolling business plan had been adopted for the HRA.  The council was working in partnership with Eastbourne Homes Ltd. (EHL), a wholly owned subsidiary, to deliver efficiency savings in partnership using shared services.  All savings accruing to the HRA were reinvested in housing services.  During the last 3 years over £1m of ongoing efficiencies had been realised.

16.7 The government had set an objective to continue reducing the nation’s budget deficit within the next 8 years (2025).  This would involve various measures that would reduce the amount of resources to local government including:

·         A further reduction in general central government support 2017-2020.

• Reducing the amount of resource available to the Department for Communities and Local Government as it was not a “protected department” which would impact on specific grants.
• Increasing in the funding for new homes bonus (NHB) paid for by further reducing the revenue support grant (RSG) which was set to be zero for the council by 2019.
• A further year on year reduction in housing benefit administration grant (on top of the £300,000 cumulative reduction in the last 6 years).

16.8 The actual effect of the national deficit reduction programme to this council had been the amount made available via the revenue support grant (RSG).  The council received £8.9m in RSG in 2010/11. Whilst a scheme to retain an element of business rates was introduced in 2013,  the council was now receiving £0.9m of RSG in 2017/18.  This would be zero by 2019.  Against this backdrop service demands on councils were ever increasing with demographic and increased expectation causal effects.  A cap on public sector pay rises would be maintained and they should not increase above 1% per annum until at least 2020.  The government had  reduced the benefits paid to members of the local government pension scheme, by pegging future increases to the CPI instead of RPI. This has had the effect of increasing the overall funding of pensions schemes and therefore reduced the demand for future increases in employer contributions.

16.9 The report set out the council’s strategy in relation to dealing with the effects of inflation in the costs of goods and services and pay, pension costs, fees and charges, interest rates, council tax, government grants and retained business rates, savings, the scope for new or enhanced service provision, the housing revenue account, reserves and the mitigation of risks.  Appendix 1 to the report set out the potential risks and mitigating measures available to the council. 

16.10 In order to maintain sustainable finances and fund its ambitions, the council would need to make new efficiency savings or income streams averaging £0.9m per annum for the next three years.  Due to the scale of the challenge the programme of change would require more radical measures for savings that often had a lead in period of 1 to 2 years, therefore the JTP programme was a key enabler to meeting this challenge as well as developing new income streams.

16.11 Resolved (key decision): (1) That the updated medium term financial strategy and associated plan 2017-21, as summarised in appendix 2 of the report, be approved.

(2) That the balance of assumptions made in the strategy be agreed.

(3) That that the emerging budget proposals for  2018/19 be brought to cabinet in December prior to detailed consultation and that the MTFS be re-presented if material changes arise in the interim.

(4) That the principal risks of the strategy set out in appendix1 of the report be agreed.